The Challenges Of Running A Closeout And Liquidation Company.
Starting a business can be risky, and buying and selling closeouts can be especially challenging as not all businesses succeed. New businesses often fail during the early years. because the market changes so quickly, and wholesale liquidators and overstock buyers already exist in many markets. These companies specialize in inventory liquidation when a business is shutting down a warehouse, closing down its operations and/or shutting down an Amazon FBA seller account.
We recommend that you seriously consider the following causes for business failure. Understanding what can go wrong, and how these challenges would affect you and your family, can help you to decide if you are ready to start a business. Closeouts in particular can be very challenging to source on a regular business, making it difficult to run a business supported by selling excess inventory and liquidating warehouses filled with goods. Wholesale closeout liquidators that specialize in catering to discount stores and off price retailers may also want to consider having a regular import line as a base. Overstock buyers have a hard time finding a steady business pattern because they are opportunity buyers only taking advantage of buying closeouts from businesses that are changing packaging or shutting down a warehouse. In some cases they are even liquidating everything and closing their business.
Before you start your business, thoroughly research your market. Many businesses fail because the market for their products or services is too small to support them. There are closeout distributors all over the country and many of them have been in business for generations. If you are new to the business you may consider partnering with an existing closeout buyer rather than trying to start a liquidation company from scratch. It isn't enough to know that a market exists for a product or service. You must also investigate the size of the market, your competitors' strengths and weaknesses, your points of difference, and the sustainability of demand for your product or service. During difficult time almost every wholesale business has closeout inventory to get rid of. They are often faced with slowing sales, forcing them to get rid of old inventory or clear slow selling inventory from the warehouse. But when the economy is good and inventory is in high demand, it may not be easy to buy enough closeouts and overstock products to keep your business profitable. Moving excess inventory is always the best option when sales slow down.
Many good business initiatives fail due to poor funding, so carefully consider your capital requirements when planning your business. Businesses often need to liquidate inventory and perhaps even liquidate their entire inventory just to raise cash. You will need enough capital to sustain your business until it begins to break even or consistently returns a profit. You could also use financial benchmarking data to find out what funding might be required to start your business. As lending rates increase, more companies will go into default, creating an environment where the are opportunities for wholesale liquidators and overstock buyers to pickup closeout and excess inventory on the cheap.
Starting your own business brings many benefits. Doing something that you love and attracting customers to buy the overstock products or closeouts you’ve created is hugely rewarding. Growing a company and providing jobs for other people can be another big thrill. But running your own business is not easy. Working for yourself without the safety net of being an employee can be a lonely, frustrating and challenging experience. To survive as overstock buyers, you have to develop thick skin and perseverance. Dealing with individuals who are going out of business or liquidating their inventory can be stressful, so it is really important to have compassion and understanding. After all, these people didn’t plat to fail. They did not anticipate having to get rid of all their inventory for pennies on the dollar to closeout brokers. By understanding the challenges you might face and how to deal with them, you’ll be much better prepared for potential problems and give your closeout business the best chance of success.
CHALLENGE: With the excitement of a new business idea, it can be tempting to launch without much forward-thinking. Yet a lack of planning can mean your business runs out of cash or isn’t prepared for vital activities such as marketing or dealing with suppliers. Business owners who plan and set themselves objectives are more likely to succeed. Closeout distributors work with importers and distributors by helping them get rid of excess inventory and closeouts. These goods are often sold at steep discounts to wholesale liquidators and overstock buyers who can move them into secondary discount markets both in and outside of the United States. Name brand closeouts may have restrictions in place where businesses getting rid of this type of inventory may want them placed in South or Central America
ACTION: Create a detailed business plan that covers areas such as marketing, staffing, finance and sales. Regularly review and update your plan as the business develops. CHALLENGE: As a first-time entrepreneur, it’s unlikely you’ll know everything about running a business. A lack of knowledge can lead to avoidable mistakes that could cost your business money. You’ll also need to overcome enormous demands on your time and energy setting up a business. Learning the ins and outs of the liquidation industry may take years and even decades. But in order to become a closeout distributor that businesses have faith in, you will have to put in a lot of hours and have a high number of transactions. You will buy closeouts from small startup companies selling closeouts only once, to large Multi National companies liquidating closeouts on an annual or semi annual basis.
ACTION: Absorb as much information you can, particularly about the industry that you’re entering, the customers you’re targeting and the competitors you face. You should also learn about critical areas such as finance, marketing and sales, so read business advice websites, attend events, join business groups and seek mentors. It takes a lot of work to build a closeout business, so you need drive and energy. Being self-confident is a bonus. You will be forced to knock on doors and make cold calls, contacting large companies and importers asking if they have inventory to get rid of. This can be anything from liquidation inventory to closeouts and overstock products, to package changes and customer returns.
CHALLENGE: Managing your time effectively is crucial when launching a start-up. New business owners have to wear so many hats that it can be easy to get distracted and focus on the wrong areas. You won’t simply be talking with companies selling closeouts and overstock buyers. You will be dealing with all the other aspects of running a business – from employees and permits to health care and supply chains.
ACTION: Planning is vital as it will keep you on track and focused on your goals. You can easily end up working in your business rather than on your business, so dedicate a set amount of time each week to reflect and analyze areas that need attention. Don’t forget it is buying and selling closeouts and liquidations that actually pays the bills. You are a sales organization in the closeout industry. Consider using time-management apps to create lists of tasks you can tick off as you go. If you have an important task to complete, find a quiet area to do it and turn off email, app and messaging notifications. Outsourcing tasks is another way to manage your time better. For example, rather than building your website or managing your tax returns, handing it over to a web designer or accountant can be more efficient and cost-effective. This allows you to concentrate on what counts: working with businesses that may be shutting down their warehouse, liquidating their entire inventory or getting rid of closeouts to make room in the warehouse for new products.
CHALLENGE: Running your business isn’t like having a 9 to 5 job. Without care, it can be all-absorbing and take over your life. You need to take steps to safeguard your mental and physical well being.
ACTION: Make sure you get enough sleep and take regular time away from work. Have breaks during the day, eat healthily and get regular exercise. Having a co-founder helps share the load, while joining networking events and business groups can give you access to fellow business owners who face similar challenges. Dealing with surplus merchandise and being an inventory liquidator is very stressful. You are always having to consider new closeout products and often must size up deals, figure out how much it is worth and determine what you can offer for various overstock inventory and liquidations. This isn’t easy to do even if you have been buying and selling closeouts for many years. Putting a price on an entire inventory from a business shutting down their 3PL warehouse can be a challenge. Whatever the scale of your closeout business, as the owner you're going to regularly be pulled from pillar to post. It's essential that you know how to manage your time to make sure you meet all the expectations of both your customers and your suppliers.
I’m convinced that about half of what separates successful entrepreneurs from non-successful ones is pure perseverance. It is so hard. You put so much of your life into this thing. Buying closeouts is a full time job of attending trade shows, making cold calls, and constantly talking with companies selling closeouts and getting rid of surplus inventory from their warehouse. There are such rough moments in time that I think most people give up. I don’t blame them. It’s really tough and it consumes your life. Buying a bad deal that loses money can be painful, even if it is a closeout and you paid half what the last guy paid. If you’ve got a family and you’re in the early days of a company, I can’t imagine how one could do it. I’m sure its been done but it’s rough. It’s pretty much an eighteen-hour day job, seven days a week for a while. Closeouts, overstock, liquidations and discontinued inventory are unforgiving. Unless you have a lot of passion about this, you’re not going to survive. You’re going to give it up. So you’ve got to have an idea, or a problem or a wrong that you want to right that you’re passionate about otherwise you’re not going to have the perseverance to stick it through.
Merchandise USA is a closeout liquidator in business since 1984 and we specialize in buying closeouts from importers who have too much inventory. When warehouse costs are too high or storage fees become too costly, we can help by buying your entire inventory for cash. We buy from 3PL warehouses shutting down, Amazon FBA sellers closing their accounts and other closeout opportunities.
